USD/JPY Short October 2010

Hmm… that COT quote is a good one hehe.. Might prove to be highly relevant in the upcoming days or weeks.Biggest net dollar shorts since 2008…Hmmm…. common sense says probably not the best time to be shorting uj… right now.

Actually shorting usd/jpy is a pretty good strategy if BoJ does not intervene. The only thing propping up usd/jpy is verbal intervention/threat of intervention. The market keeps grinding lower every day and will eventually break lower if the BoJ does not intervene. Add to that the threat of the equity markets correcting downward a bit which will add some more fuel to the fire for shorting usd/jpy.

If BoJ does not intervene usd/jpy will get annihilated. The only other thing that will get the market to buy up usd/jpy will be if the economic picture in the U.S. begins to improve and people believe the FED will begin to end their quantitative easing. Judging by some of the things that happened last week that isn’t a likely scenario and it usually takes a few weeks for that to play out.

There are a lot of trader’s trying to buy dips in usd/jpy hoping the BOJ is going to save their ass. That intervention they did back on sept 14/15 may have been partially related to the tight elections that had just finished and the prime minister trying to flex his muscles and show the country that he was worried about JPY strength.

So if you want to buy dollars, you should probably sell another currency other than the JPY. In other words look to short eur/usd, gbp/usd, etc if you believe the COT is giving you a signal to buy dollars. USD/JPY is a completely different beast to analyze….